Office Leasing in Q3 Up in Major Indian Cities

India’s commercial real estate (CRE) market is growing by leaps and bounds and remained positive in the quarter ending September. The prime office space market continues to be buoyant due to increased investor activity, sustained leasing demand from technology companies and growing leasing interest from occupiers.
According to our market research, office space leasing grew marginally but significantly during Q3 in eight major cities and stood at 10.4 million sq. ft. Even as leasing activity remained upbeat, the office space absorption rose by 2 percent quarter-on-quarter.

Co-working leasing picking up

The previous quarter witnessed increased activity from EMEA (Europe, Middle East, Africa) corporates resulting in their share of CRE leasing rising to 14 percent from 9 percent in the previous quarter.
At the same time, the latest trend of co-working and shared office space formats is catching the fancy of the market. Both global, as well as domestic co-working operators, expanded their operations in Mumbai, Bengaluru, Delhi NCR and Pune. Even as demand for traditional office space continues to dominate the market, newer formats such as shared spaces are gaining momentum and increasing their share of the CRE pie.

IT sector drives maximum demand

The cities of Bengaluru, Delhi-NCR, and Hyderabad dominated the quarterly leasing activity with a share of more than 60 percent. Bengaluru led office leasing activity with a 31 percent share of the overall demand followed by Delhi NCR at 25 percent, Hyderabad and Chennai at 12 percent each, Mumbai at 10 percent, Pune at 8 percent and Kolkata at 2 percent.

As for sector analysis during Q3, IT/ITeS sector continued to drive demand for CRE leasing accounting for about 34 percent share of the overall leasing. On the other hand, the contribution of other sectors such as engineering, manufacturing, banking, financial services, and insurance fell marginally on a quarterly basis.

According to experts, Indian cities are expected to continue their rapid pace of growth and dominate the global growth rankings. After some teething troubles, the new tax regime of GST is finally gaining acceptance and generating larger than anticipated revenues indicating a revival of the overall economy.